Question

In: Accounting

Suppose the depreciation rate of capital decreased at time t* permanently. How would this affect real...

Suppose the depreciation rate of capital decreased at time t* permanently. How would this affect real wage rate, real rental rate, real interest rate and price level in long run and very-long run in a closed market economy?

Solutions

Expert Solution

ekkarill92 answered 3 months ago
Next > < Previous

Related Solutions

Question. (World limit: 450 words) Suppose a change in regulations has permanently decreased the profit margins...
Question. (World limit: 450 words) Suppose a change in regulations has permanently decreased the profit margins for the monopolistically competitive firms. (a) Draw the impulse response functions of the economy following the shock. (b) Draw the IS=PC=MR diagrams for this scenario. Make sure you explain every step of the adjustment towards the equilibrium.
What is a depreciation tax shield, and how does it affect capital budgeting decisions?
What is a depreciation tax shield, and how does it affect capital budgeting decisions?
How can effective federal funds rate can affect real GDP? How can real GDP affect effective...
How can effective federal funds rate can affect real GDP? How can real GDP affect effective federal funds rate? if the percentage in real GPD increases will the percentage in effective federal funds rate decrease or increase? Please provide examples.
Suppose that exchange rates are not constant over time. How would you modify the real interest...
Suppose that exchange rates are not constant over time. How would you modify the real interest rate parity equation between Canada and the US to cancel investment arbitrage opportunities?
Distinguish between the nominal rate and the real rate of interest. How does inflation affect the...
Distinguish between the nominal rate and the real rate of interest. How does inflation affect the real, ex post (after the fact) rate of return to investors?
How the depreciation of the Chinese yuan against the Australian dollar would affect the cost to...
How the depreciation of the Chinese yuan against the Australian dollar would affect the cost to an Australian company that borrowed Chinese yuan and used the proceeds for an Australian project. Select one: a. Australian company’s cost of borrowing will be lower b. Australian company’s cost of borrowing will be higher c. Chinese company’s cost of borrowing will be higher d. Chinese yuan company’s cost of borrowing will be lower
Use the Solow growth model to answer the questions below. Suppose the depreciation rate of capital...
Use the Solow growth model to answer the questions below. Suppose the depreciation rate of capital decreases in a permanent manner. Explain the impact on capital per worker. Explain the impact on output per worker. Explain the impact on consumption per worker in the short run and the long run. 2. Use the Solow growth model to answer the questions below. Suppose the population growth rate decreases in a permanent manner. Explain the impact on capital per worker. Explain the...
Suppose the Federal Reserve announces that they will permanently decrease the inflation target rate. (a) Graphically...
Suppose the Federal Reserve announces that they will permanently decrease the inflation target rate. (a) Graphically illustrate the impact the change in the target inflation rate using the dynamic model of aggregate demand (DAD) and aggregate supply (DAS). Assume that the economy is initially at long-run equilibrium. (9 Points) (b) Describe the transition of both output and inflation to the long-run equilibrium in words. (6 Points)
Suppose the Federal Reserve announces that they will permanently decrease the inflation target rate. (a) Graphically...
Suppose the Federal Reserve announces that they will permanently decrease the inflation target rate. (a) Graphically illustrate the impact the change in the target inflation rate using the dynamic model of aggregate demand (DAD) and aggregate supply (DAS). Assume that the economy is initially at long-run equilibrium. (9 Points) (b) Describe the transition of both output and inflation to the long-run equilibrium in words.
Suppose people now have higher time preferences. How would this affect the loanable funds market? Show...
Suppose people now have higher time preferences. How would this affect the loanable funds market? Show your answers in a graph. Would GDP increase or decrease? 2. Can real interest rate be higher than nominal interest rate? Explain.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT